HUBZone Concerns Lose Program Eligibility As Many Qualified HUBZone Areas Expire

October 26, 2011

In October 2011, the Census Bureau released data from the 2010 Decennial Census that may immediately impact the HUBZone eligibility for many small business concerns. If you are a qualified HUBZone concern, or intend to partner with a HUBZone concern for upcoming proposal efforts, it is imperative that you read the notice on the Small Business Administration’s (“SBA”) website for updates to the HUBZone maps and determine whether your concern’s program eligibility is at risk.

Many HUBZone Concerns May Be Decertified: If your principal office is located in one of these re-designated areas, then your HUBZone eligibility expired when the Census data was released.

Additionally, HUBZone contractors must immediately assess whether and to what extent the elimination of certain re-designated areas will affect compliance with the 35% residency requirement. The SBA estimates that many additional HUBZone concerns will lose their program eligibility when the re-designated areas expire because fewer than 35% of their employees will reside in a HUBZone.

Keep in mind that under 13 C.F.R. § 126.501, a HUBZone concern must notify the SBA of “any material change that could affect its eligibility,” including a change in the principal office location or failure to meet the 35% residency requirement. Although contractors performing under HUBZone contracts must “attempt to maintain” the 35% residency requirement during performance of the contract (13 C.F.R. § 126.200(b)(5)), failure to meet the residency requirement at the time of the initial offer and award of a HUBZone contract will disqualify a concern for the contract. See 13 C.F.R. § 126.601(c).

Decertified HUBZone Concerns May Reapply After 90 Days: Historically, any concern that lost its HUBZone status had to wait one year from the date of program decertification before reapplying for HUBZone status. However, in recognition that a significant number of HUBZone concerns that lost their eligibility, the SBA issued an interim final rule (effective July 21, 2011) reducing the period to only 90 days. See76 FR 43571-43574; 13 C.F.R. § 126.309 (as amended). This reduced period will allow concerns to relocate their principal office, and/or hire enough additional employees residing in qualified HUBZones, to quickly re-qualify for the HUBZone program.

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